Monday, September 29, 2008
These are timely words for this past week. Washington Mutual is no longer an entity, and now Wachovia. The average Joe investor… or any Joe for that matter has to be wondering what other institution is going to crumble. The $700 billion bailout package didn’t pass vote, and the market is taking everyone for a wicked roller coaster ride. Do you still have faith in an economic turnaround? Now for my recent plays. Research in Motion (RIMM) took a massive dive on Friday after the company reported quarterly results that weren’t up to par. Analysts are concerned on two fronts, increased spending, and the ever increasing competitiveness of the handset market during a time of slowing consumer weakness. I buy the latter argument, but not so much the worry about increased spending. Operating margins for the last quarter are still running at 27%. Gross margins are at 50%. There are not too many businesses that operate with such huge margin numbers. These buffers will hopefully help the company in the coming quarters. In any case RIMM is hurting the portfolio, but I’m holding. On Friday I decided to sell my entire NutriSystem (NTRI) position. It simply came down to taking my profits with a return on investment of 14%. There is the likelihood of NutriSystem dipping below the initial sales estimates I had earlier this year. Back then, I had outlined a possible worst case scenario for NutirSystem at 5% sales declines for 2008 and 2009. This put the company at roughly $19/share. In this environment the 5% declines may have been conservative. It was time to take some profits and keep a close eye on the company in the coming months. More job losses to strengthen enrollment numbers at for-profit colleges is looking more like a reality now. For those following the education sector, DeVry is starting to look good again dipping below 50 today. Best to watch this company as well. Time to bunker down, finish up my Herman Miller (MLHR) analysis, and establish my playbook for the next little while. Whoo Hoo!